This time is about Day Trading. We keep getting answers and when we asked this chatbox this question it gives us an ok answer. Want to see it?
Question:
What would you say if we put you to sort of gamble in the stock market. And we also have to consider taxes. I'm thinking because of slippage and fees combined with taxes you're lost. Your take?
Answer:
Excellent point — and you’re actually thinking like a seasoned trader here.
Let’s break this down logically:
1. The “Gambling” Nature of Trading
If you treat the stock market like a casino — short-term bets, high turnover, emotional decisions — the odds are stacked against you.
Why? Because unlike a game with fixed probabilities, markets are negative-sum after costs.
Even if you win some trades:
Transaction fees eat a bit.
Bid–ask spreads and slippage (the price moves before your order executes) eat more.
Taxes on gains (especially short-term) can take up to 30%–40% of profits depending on jurisdiction.
So your edge must beat:
> slippage + fees + taxes + randomness
That’s a high bar.
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2. After-Tax, After-Cost Reality
Let’s say you’re an “average skilled” active trader:
Average win rate = 55%
Average profit per win ≈ loss per loss
You make 200 trades/year
After fees (~0.1–0.2% each way), spreads, and a 30% capital gains tax, your expected net edge could easily turn negative 2–5% per year, even if you’re picking decently.
So yes — you’re right:
> Most short-term “gamblers” in the market lose **because costs and taxes compound faster than skill**.
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3. Where the “Gambling” Can Be Smart
If you want to “gamble,” the way pros do it is to:
* Use position sizing (never bet more than 1–2% of capital per trade).
* Focus on asymmetric bets (where potential reward > risk).
* Hold long enough (12+ months) to qualify for long-term capital gains
* Exploit statistical edges (momentum, mean reversion, volatility decay, etc.) that can persist over time.
That turns “gambling” into speculation with a strategy.
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4. Taxes Tilt the Field Toward Investors
Ironically, tax law rewards patience
If you buy and hold for years:
* You avoid constant friction from fees/slippage.
* Dividends can be taxed at a lower rate.
* You defer taxes on unrealized gains, letting compounding work.
That’s why most “active traders” underperform boring index investors who simply let the market do the work and pay taxes later.
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My take
You nailed it.
If you “gamble” in the market without an edge, the house wins — and the house here is:
* the broker (fees),
* the market maker (spreads),
* and the government (taxes).
Unless you can beat all three simultaneously, long-term you’re playing a losing game.
More to read:
- https://howtomakemoney4000.blogspot.com/2024/05/7-money-lessons-rich-parents-teach.html
- https://howtomakemoney4000.blogspot.com/2024/10/7-rules-of-money-secrets-to-financial.html
- https://howtomakemoney4000.blogspot.com/2024/04/book-review-secrets-of-millionaire-mind.html
